Governance Practices and Illicit Financial Flows in Kenya’s Oil and Mining Sectors
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Date
2022
Authors
Mithia, Catherine Njeri
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Extractive industries, notably oil and mining sectors are associated with high levels of illicit
financial flows. Illicit financial flows cause scathing economic, social, and political costs to a
country‟s development agenda, particularly countries endowed with natural resources like oil and
minerals, since they deplete a government‟s revenues by reducing a country‟s tax base, as private
wealth is unlawfully transferred out of the country. While Kenya has an emerging oil and mining
industry with an increasing record of the discovery of mineral resources, expanding mining
ventures, and discovery of oil in Turkana, its contribution in the extractive industry is currently
low and is expected to grow considerably in the next few years to become a key contributor to
Kenya‟s GDP, the sectors are at risk of illicit financial flows jeopardizing the country‟s ability in
collecting much-need revenue. Therefore, this study aimed to investigate the effect of
governance practices, in particular transparency, accountability, and the rule of law, in curbing
illicit financial flows in Kenya‟s oil and mining sectors. The theories on which this study was
based included stakeholder theory, agency theory, and resource-based view theory. The
researcher adopted a mixed-method research design by targeting stakeholders in the oil and
mining sectors within Nairobi County. The study involved 93 respondents consisting of key
stakeholders in mid-level and senior management positions in both government and civil society
organizations. The quantitative data was collected by filling in semi-structured questionnaires
while qualitative data was collected through drop and pick questionnaires. The quantitative data
are presented using tables, texts, and graphs while qualitative data is presented through the
identification of common themes from the responses. The findings from qualitative and
quantitative data analysis show that the three independent variables (rule of law, transparency,
and stakeholder accountability) have significant effect on curbing illicit financial flows in
Kenya‟s oil and mining sectors. However, the regression model shows that the rule of law has
the highest influence on the independent variable, followed by transparency, and stakeholder
accountability has the least influence. The study recommends the adoption of international
standards and codes governing oil, gas and mining industries globally including the Extractive
Industry Transparency Initiative (EITI), to enhance contract transparency in Kenya‟s Oil and
Mining sectors. It also recommends the domestication of the African Mining Vision (AMV) that
offers a combination of local and international strategies that will improve capacity for mineral
sector governance and contract negotiation.
Description
A Research Proposal Submitted in Partial Fulfillment of the Requirements for the Award of
The Degree of Master of Public Policy and Administration, of the School of Humanities and
Social Sciences, Kenyatta University December 2021
Keywords
Kenya’s Oil and Mining Sectors, Governance Practices in Oil and Mining, Oil and Mining Sectors, Illicit Financial Flows in Kenya’s Oil and Mining Sectors